REVIEW & OUTLOOK
Dem-onomics
On economics, the Democratic presidential candidates are far to the left of Clinton.
Wednesday, November 5, 2003 12:01 a.m. EST
URL:http://www.opinionjournal.com/editorial/feature.html?id=110004261
Notwithstanding the third quarter's 7.2% growth boom, Democrats seem undaunted in attacking President Bush's economic policies. Well, that's politics, and it is always possible that a year from now one of them could win.
So it's worth distilling the economic themes that the main Democratic Presidential contenders have been offering this primary season. All of them naturally invoke the prosperity of the 1990s, but what's notable is how much their policies sometimes diverge from those of the Clinton years. This is not the same Democratic Party of 1992, or even 2000. For example:
• The taxman cometh, again and again. All nine of the candidates are proposing to raise taxes, the only difference being how much and on whom. Among the non-crank candidates, Dick Gephardt and Howard Dean are the bravest, or the most suicidal, depending on your politics. They're proposing to repeal every dime of the Bush tax cuts, regardless of income.
Dr. Dean then goes further and proposes lifting the income cap on payroll taxes, a huge marginal rate increase on anyone making more than $87,000 a year. All of this plays well with liberal primary voters who loathe all things Bush, but it would amount to the largest tax increase in history if they prevailed.
The other major candidates would merely repeal the tax cuts on the "wealthy," which Joe Lieberman defines as a couple earning more than $150,000. John Kerry and John Edwards have a similar strategy. This worked politically for Bill Clinton in 1992, though only because the 1990s' recovery started closer to Election Day than the current one and the first President Bush had raised taxes. Banging on the rich doesn't usually work when everybody in the country is getting richer.
• The miracle of 1993. In this Democratic version of the Big Bang theory, all modern prosperity began when Congress passed the Clinton tax hike in that glorious summer a decade ago. Mr. Gephardt in particular likes to tout his heroic one-vote victory in the House. Mr. Clark was in the Army at the time, but he's taking counsel from Robert Rubin and other Clintonites on the point.
In this theory, the tax increase caused revenues to cascade into the Treasury, which in turn caused interest rates to fall, and the boom was on. All of this is a repudiation of the old Democratic argument, rooted in Lord Keynes, that tax cuts were advisable in difficult times. Nowadays most Democrats believe in tax increases as fiscal stimulus.
Of course, this theory also overlooks a little economic history. Long-term interest rates actually rose through most of 1994, peaking on the day Republicans took Congress promising to cut spending and taxes. The much bigger bang came from the Gingrich revolution. Only with it did rates fall, the budget move toward balance, the stock market soar and the boom begin. (See the chart nearby.)
• Protectionism. The largest exception to the candidates' embrace of Clintonomics is trade. In a recent debate, Mr. Gephardt pointed out with pride that--unlike his opponents--he had never supported Mr. Clinton on Nafta, China and other open trade pacts. To dodge these arrows and win in Iowa, Dr. Dean and Mr. Kerry have in turn walked away from their earlier Nafta support. Most of the candidates also support Mr. Bush's misguided steel tariffs, which Mr. Clinton resisted.
With the exception of Messrs. Lieberman and Clark, all of the candidates now accept the AFL-CIO-Sierra Club diktat that any new trade deals must impose U.S. labor and environmental standards on the rest of the world. Since few important countries are likely to accept these terms, this is a recipe for ending all future trade deals.
• Entitlements are forever, in every detail. It's hard to recall now, but reforming Medicare and Social Security was also once a Clinton ambition. No more. The message of the current Democratic candidates is back to the future of 1969.
All of the candidates oppose Mr. Bush's prescription drug plan for Medicare, but only because they say it isn't generous enough. Messrs. Gephardt and Kerry are pounding Dr. Dean daily for having dared even to consider reforming Medicare during the 1990s. Mr. Dean has responded by denying he'd ever do such a horrible thing. If any of these candidates win, Social Security and Medicare will be on autopilot for four more years closer to the day the Baby Boomers retire. These are of course the same candidates who say the Bush tax cuts are "fiscally irresponsible."
Part of the political dynamic at work here is a primary bidding competition that is pushing everyone to the left. While Messrs. Gephardt and Lieberman are holding firm in support of the Iraq war, on economics the day of the New Democrat seems to be over. Higher taxes, unrestrained entitlements, less free trade: The voters will certainly be getting a choice and not an echo. |
